THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY

Required Report - public distribution

Date: 12/11/2015 GAIN Report Number: CA15110

Canada

Food Service - Hotel Institutional

An Updated Overview of HRI Sector in Canada

Approved By: Jeff Zimmerman – Agricultural Attaché and Director of Marketing Prepared By: Maria A. Arbulú – Senior Agricultural Marketing Specialist

Report Highlights: Canada remains a top U.S. agricultural export destination for consumer-oriented products offering promising opportunities for small businesses to expand their sales to Canada. In fiscal year 2015, U.S. agricultural exports to Canada reached $22 billion making Canada the second largest export destination, closely behind China. However, a closer look reveals Canada remains in the number one position as the ideal export market for U.S. consumer oriented products, reaching $17 billion, an amount double to the second highest export destination, Mexico. For those U.S. firms with unique and competitively priced products, the food service sector serves as an excellent entry into the Canadian market. Post:

Contents

Section I: Market Summary ...... 3 Breakdown of HRI Food Sales in Canada by Province and by Sub-Sector for 2015 ...... 3 Breakdown of HRI Food Sales in Canada by Sub-sector ...... 6 Expected Growth Rate by Commercial Sub-Sector (2015-2018) ...... 7 Global and Canadian Imports of Consumer Oriented ...... 7 Advantages and Challenges for U.S. HRI Food Products ...... 8 Section II. Road Map for Market Entry ...... 9 Entry Strategy ...... 9 Frequently Asked Questions and their Answers ...... 12 Canadian Government Standards and Regulations ...... 14 Key Contacts ...... 16 Summary of Useful Websites ...... 16 Section III. Market Structure and Foodservice Distribution Channel ...... 19 Sub-Sector Profiles ...... 20 Hotels and Resorts ...... 20 ...... 22 Institutional ...... 25 Partial Listing of Foodservice Distributors ...... 26 Section IV. The GRID on Leading U.S. Products and the Competition ...... 27 Section V. Growing Trends ...... 34 Section VI. Top Ten Hot Trends on Canadian Menus ...... 35 Appendix B. Summary of Key Resources ...... 38

2 | P a g e

Section I: Market Summary

Restaurants Canada national association estimates 2015 growth in foodservice sales at 4 percent from the previous year, reaching C$74 billion (US$59 billion). The industry is important to Canada’s economy as the sector contributes 3.6 percent to the country’s GDP. The industry serves as a training ground for a number of young Canadians getting their first job experience. Today, the foodservice sector engages 1.2 million workers through 91,250 foodservice locations in the country. The expected growth for the industry in the coming years continues to look promising as steady growth is predicted:

All figures in Canadian Dollars Source: Restaurants Canada and Euromonitor International

Breakdown of HRI Food Sales in Canada by Province and by Sub-Sector for 2015

Both and Quebec combined represents 57 percent of the total foodservice sales in Canada, with C$22.3 billion and C$10.1 billion respectively. Combined these two provinces reflects the industry concentration. In the last 12 months, Manitoba, Nova Scotia and Ontario posted increases in revenue sales of over 4 percent, with British Columbia following with a growth rate of 3.9 percent.

Below is a provincial breakdown:

3 | P a g e

Source: Statistics Canada and Restaurants Canada Industry Forecast o Foodservice Subsectors

The industry falls into three main subsectors. They are hotels and resorts, restaurants, and the institutional foodservice sector.

Hotels and Resorts

Canada attracts over 1.6 million international visitors from around the world with 75 percent of them from the United States. The growing number of visitors help fuel the growth of foodservice in this sector. The Hotel Association of Canada reports 8,090 hotels, motels and resorts that generated revenues of close to C$17.5 billion (US$16 billion) in 2014 and in these ‘accommodation foodservice’ sales reached 6 billion (US$5.5 billion)1. These establishments accounted for 440,123 rooms. Growth rate for ‘accommodation foodservice,’ in 2014/2015 is 4.6 percent. Canada continues to attract visitors to its destinations, particularly with the strengthening of the U.S. dollar. Some of Canada’s most profitable hotel chains are, Four Seasons Hotels and Resorts, Fairmont Hotels International, Starwood Hotels & Resorts Worldwide, Marriott Hotels of Canada (acquired Delta Hotels), Wyndham Hotel Group, Invest REIT, and Best Western International.

1 2014 Canadian Institutional Foodservice Market Report by fsStrategy, p. 10

4 | P a g e

Restaurants

Canada is home to 91,250 restaurants, bars and caterers who generate C$56 billion (US$51 billion) in annual sales.2 The growth rate for 2014/2015 is 3.6 percent. According to a survey conducted by Vacay.ca for the Top 50 Restaurants in Canada, consumers still prefer eating at their favorite independent eatery. Sixty percent of the establishments are independent while 40 percent are franchised or part of a national or local corporate chain. Canadians make approximately 18 million restaurant visits daily. Lunch continues to be the meal occasion most often consumed away from home, accounting for 25 percent of these visits. More recently, snacking has become more of an eating occasion for consumers away from home. Also, the rise in independent and chain coffee establishments has created an ideal venue for Canadians to work and meet friends for a quick snack occasion. This in turn has spurred the demand for lite and healthy foodservice products for this segment of the market.

In recent years among quick-service restaurants (QSR) there has been sizable growth of the fast casual dining sub-sector. While they still make up a small segment of the QSR segment, this subsector is growing and changing the industry as they continue to attract new and other patrons from other types of restaurants. These restaurants offer a high-quality menu either offering healthier or fresher choices which consumers are willing to pay more for. Market research firm, NPD Canada reports this sector has grown in recent years by 13.9% and shows steady growth in the coming years.

Another factor influencing the restaurant industry is the interest among consumers to experience the foods they eat in restaurants at home. Trade journal, Foodservice and Hospitality, reports the growth of grocer’s home-meal replacements (HMR) by 17% in the last five years has stimulated take-home/take- out opportunities from the industry. Industry specialists forecast restaurants will be providing more HMR-style offerings to their patrons or possibly establishing a retail section in their restaurants. Recently Nielsen Canada used the National Restaurant Association’s term, ‘grocerants,’ referring to this recent evolution.

Institutional

The institutional foodservice sector in Canada reached C$4.5 billion (US$4.1 billion) in 2014. The sector consists of hospitals, residential care facilities, schools, prisons, factories, remote facilities and offices, including patient and inmate meals at correction facilities. In recent years, Restaurant Canada reports sales to the institutional sector has decreased and reported a modest increase of 2.4% this past year. This could largely be due to some institutions contracting some of their foodservice requirements to caterers and other foodservice suppliers. Food sales destined to retirement facilities and hospitals grew by less than one percent while revenues increased by 10.1 percent for product sold to long-term care facilities.

2 2014 Canadian Institutional Foodservice Market Report by fsStrategy, p.10

5 | P a g e

Breakdown of HRI Food Sales in Canada by Sub-sector

2013 percent 2014 percent 2014 percent Final Change Prelimin Change Forecast Change '13/12 ary '14/13 '15/'14 Quick-service $ 4.4 $ 5.8 $ 3.9 Restaurants 24,137.9 percent 25,536.00 percent 26,531.9 percent 0 0 Full-service $ 5.2 $ 5.0 $ 3.6 Restaurants 23,722.0 percent 24,916.30 percent 25,813.2 percent 0 0 Caterers $ 3.4 $ 6.6 $ 3.7 4,600.40 percent 4,903.60 percent 5,085.00 percent Drinking Places $ -1.2 $ -0.7% $ 0.7 2,311.30 percent 2,296.10 percent 2,312.10 percent Total Commercial $ 4.4 $ 5.3 $ 3.6 54,771.6 percent 57,651.90 percent 59,742.3 percent 0 0

Accommodation $ 3.1 $ 4.7 $ 4.6 Foodservice 5,623.00 percent 5,890.00 percent 6,162.00 percent Institutional $ 6.1 $ 3.4 $ 2.4 Foodservice 4,252.50 percent 4,397.20 percent 4,501.00 percent Retail Foodservice $ 10.1% $ 5.5 percent $ 4.2 1,351.30 percent 1,425.60 1,485.5 percent Other Foodservice* $ 2.3 $ 2.8 percent $ 3.0 2,416.30 percent 2,484.00 2,558.50 percent Total Non- $ 4.5 $ 4.1 $ 3.6 commercial 13,643.1 percent 14,196.80 percent 14,707.0 percent 0 0

Total Foodservice $ 4.5 $ 5.0 $ 3.6 68,414.0 percent 71,848.70 percent 74,449.2 percent 0 0 Menu Inflation 2.3 percent 2.1 percent 2.4 percent Real Growth 2.2 2.9 1.2 percent percent percent

Source: Restaurants Canada’s InfoStats, Statistics Canada, fsSTRATEGY Inc. and Pannell Kerr Foster All dollar amounts above in Canadian millions, October 1, 2014 to November 1, 2015 – USD$1.00 = CAD$1.24 *Includes vending, sports and private clubs, movie theatres, stadiums, and other seasonal or entertainment operations

6 | P a g e

Expected Growth Rate by Commercial Sub-Sector (2015-2018)

Source: Restaurants Canada’s Foodservice Facts (2014)

Global and Canadian Imports of Consumer Oriented Foods

Total Global Total U.S. Food U.S. Share of Total Foodservice Sales Imports Imports Market in Canada (US$ millions) (US$ millions) (US$ millions) 2010 20,243 12,575 62 percent 59,390 2011 22,818 14,297 62 percent 65,950 2012 24,314 15,535 62 percent 65,261 64 percent 2013 25,563 16,420 66,160 64 2014 26,265 16,817 percent 69,000 2015- 64 percent p 26,301 16,832 59,000*

7 | P a g e

Source: Global Atlas Trade Consumer-oriented Foods are value added products which include portion control meats, fruits, rice, foodservice packaged vegetables, etc. *The drop in foodservice sales in Canada is due to the rate fluctuation for the last 12 months.

Advantages and Challenges for U.S. HRI Food Products

Canadian Market Overview Summary

Advantages Challenges

A sophisticated selection of product is already available Similar eating and buying patterns in the Canadian market

Dairy and Poultry product imports are controlled and Wide exposure to U.S. culture limited by a tariff rate quota system

Geographical proximity provides an advantage in shorter transit delivery times Higher landed costs, particularly on small shipments

High U.S. brand awareness More competitive pricing in foodservice then retail

Frequent business and personal trips to Conversion of measurements to metric system required United States by Canadians

8 | P a g e

Standard Canadian English required Ease of business travel to Canada

Differences in nutrition labelling. Not required on Duty free tariff treatment for most foodservice products but helpful for foodservice products under NAFTA operators.

High U.S. quality and safety perceptions Differences in chemical residue tolerances

U.S. origin top choice among imported Higher landed costs, particularly on small shipments foods

Canada’s wide ethnic diversity provides a broad specialty cuisine opportunities

Section II. Road Map for Market Entry Entry Strategy

Food product manufacturers from the United States seeking to enter the Canadian marketplace have a number of opportunities. The United States is Canada’s primary trading partner – with more than 64 percent of Canada’s processed food imports originating from the United States. The demand for U.S. foods can be attributed to many factors, such as; proximity to the market, reliable shipping methods, similar business practices and similar food tastes between Canadians and Americans.

Although, Canadians are looking for new and innovative U.S. products, there are a number of challenges U.S. exporters must be prepared to meet. Some of them include currency, customs procedures, regulatory compliancy, and labeling requirements.

Overcoming these hurdles is possible with the right tools. FAS together with agricultural partners facilitate the exporting process and we recommend the following as first steps when entering the Canadian market:

1. Contact your state regional trade office or the international specialist of your State Department of Agriculture. 2. Conduct a thorough research on the competitive marketplace.

9 | P a g e

3. Locate a Canadian partner, such as a broker/distributor/importer to help in identifying key Canadian accounts. 4. Learn Canadian government standards and regulations that pertain to your product.

Step 1: Contact your State Regional Trade Office or the international specialist of your State Department of Agriculture.

FAS/Canada relies on the State Regional Trade Group (SRTG) offices based in the U.S. to provide further export counseling. These offices are supported through USDA government funding. Their export programs have been acknowledged by third party audit/consulting groups to be highly effective in guiding new-to-market and new-to-export U.S. companies. Their programs include a number of services as; one-on-one counseling, participation in business trade missions, support to Canadian and certain selected international trade shows in the U.S. In some cases, under the Branded Market Access Program (MAP) they are in a position to provide limited financial assistance for small and medium sized firms that meet the U.S. government’s criteria for assistance. This assistance may include reimbursements for; marketing and point-of-sale reimbursements, participation in trade shows, part-time contractors, and costs of sample shipments. U.S. exporters are encouraged to either contact their State Department of Agriculture’s International representative or their regional SRTG office. Click below to identify the SRTG covering a specific region:

State Regional Web Site States

Food Export USA http://www.foodexportusa.org Connecticut, Delaware, Maine, Northeast Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont Food Export http://www.foodexport.org Illinois, Indiana, Iowa, Kansas, Association of the Michigan, Minnesota, Missouri, Midwest USA Nebraska, North Dakota, Ohio, South Dakota, Wisconsin

Southern U.S. http://www.susta.org Alabama, Arkansas, Florida, Trade Association Georgia, Kentucky, Louisiana, (SUSTA) Maryland, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Puerto Rico, Virginia, West Virginia

Western U.S. http://www.wusata.org Alaska, Arizona, American Samoa, Agricultural Trade California, Colorado, Guam, Association Hawaii, Idaho, Montana, Nevada, (WUSATA) New Mexico, Oregon, Utah, Washington, Wyoming National http://www.nasda.org/9383/States.aspx State Directory of the State Association of Department of Agriculture State Departments of Agriculture (NASDA)

10 | P a g e

Step 2: Research the competitive marketplace

The State Regional Trade Groups will often have available information on specific markets. Some of the SRTGs maintain Canadian representatives that can help in providing specific market intelligence to a particular product category. This type of information is invaluable as this may help a potential U.S. export to price their products accordingly and identify the food channel most appropriate for their company. In coordination with the SRTG’s services, FAS/Canada publishes over fifty market and commodity reports that are available through the Global Agriculture Information Network (GAIN) for a number of commodities. To access these reports go to: http://gain.fas.usda.gov/Lists/Advanced percent20Search/AllItems.aspx

Step 3: Locate a Canadian partner - broker/distributor/importer

It is recommended that most new entrants to the Canadian market consider appointing a broker or develop a business relationship with a distributor/importer to enter the Canadian market. Some retailers and even distributors prefer U.S. companies appointing a broker that will set up a distribution network. As the market is smaller than that of the United States, food companies are urged to closely evaluate their Canadian business partners well before entering into a contractual arrangement. Factors such as work experience, the Canadian firm’s financial stability, product familiarity, account base, sales force, executive team commitment, and other considerations should all be taken into account prior to appointing the Canadian partner and or a entering into a future business transactions.

A partial listing of Canadian food brokers is available on our latest brokers report, Agent/Broker Directory – Central Canada (CA 11025) available online at: http://gain.fas.usda.gov

FAS/Canada can provide some assistance in identifying a broker/distributor/importer but is not in a position to endorse any Canadian firm. Furthermore, companies are encouraged to visit and/or participate in specific trade shows in Canada (see http://www.ats-sea.agr.gc.ca/eve/eve-can-eng.htm for a complete listing of trade shows in Canada) as this will help in evaluating the market and meeting potential Canadian partners.

FAS/USDA recommends a number of Canadian food shows. Among them is the Restaurants Canada Show which is the premier foodservice show in Canada. The event attracts 13,000 executives from the foodservice sector. The show takes place annually from the first Sunday to Tuesday of March each year at the Direct Energy Centre in Toronto. This year the event will take place February 28 thru March 1, 2016. Additionally, the show organizers partners with two other foodservice shows in Atlantic Canada and in Vancouver, British Columbia. Although, FAS/Canada currently offers no USA Pavilion, some of the U.S. state agencies exhibit with a state pavilion. In previous years, if there is enough interest, show management has pulled together a U.S.A presence on the exhibit floor. Interested U.S. companies are recommended to contact their respective Department of Agriculture representative or Natalie Mestnik, show coordinator at [email protected]

FAS/USDA endorses one trade show in Canada that attracts some food service executives; SIAL Canada. The event alternates between Montreal, Quebec and Toronto, Ontario. The show takes place in Montreal the even years and in Toronto the odd years. Next year’s show will take place in Toronto from Tuesday, April 13th to Thursday, April 15th of 2016 at the Palais Congre in downtown Montreal. For the 11 | P a g e

first time, the U.S. will be the Country of Honor and FAS/Canada anticipates this will serve to attract more Canadian buyers to visit the USA Pavilion and its’ companies. Interested U.S. food companies can contact FAS/USDA’s show contractor, IMEX Management and ask for Kelly Wheatley at [email protected] / T. 704-365-0041 or Sharon Cook at [email protected]

Step 4: Understand Canadian government standards and regulations that pertain to your product Review the 2015 GAIN Export Guide (CA15113) Canadian government standards and regulations that pertain to your product. FAS/Canada recommends contacting the Canadian National Import Service Centre to ensure all customs paperwork is accurate and allow for pre-clearance of exported goods from the U.S. Canadian agents, distributors, brokers, and/or importers are also very adept to assisting exporters through the import regulatory process.

Canadian National Import Service Centre 7:00 a.m. to 3:00 a.m. (Eastern Time) Telephone and EDI( electronic data interexchange: 1-800-835-4486 (Canada or U.S.A.) 1-289-247-4099 (local calls and all other countries) Fax: 1-613-773-9999 Mailing Address: 1050 Courtney Park Drive East Mississauga, Ontario L5T 2R4

The best entry method depends on the food product and the sub-sector identified as appropriate for each food product. Government and industry import policies and trade acts regulate each sub-sector. Each U.S. export opportunity must be thoroughly investigated relative to the legislation that exists for the product requesting entry. For additional information on the broadest Canadian regulations see the Food and Agricultural Import Regulations and Standards (FAIRS) Country Report and the FAIRS Export Certificate Report available online at: http://gain.fas.usda.gov

Frequently Asked Questions and their Answers

The following are some of the common questions asked by U.S. food and agricultural product exporters of the staff at the Office of Agricultural Affairs in Ottawa.

1. Question: Do I need to modify my labels for foodservice as I do for the retail market in Canada?

Answer: The Canadian Food Inspection Agency exempts foodservice products from bilingual and nutrition facts table (NFT) requirements. However, there are other mandatory requirements to meet label compliancy such as the common name of the product, country of origin, best/before dates, storage instructions, general nutrition information, and other elements. Additionally, as more and more restaurant menus try to inform their patrons of healthy options, some food processors are voluntarily providing nutrition information in the NFT format so it is easy to understand.

Most U.S. firms engage the services of a labelling specialist to ensure all required compliancy have been met as regulations may be difficult to interpret for a manufacturer unfamiliar with these requirements. In the coming year, with the proposed labelling changes being introduced possibly in 2016 by Health

12 | P a g e

Canada and CFIA, FAS Canada is urging firms to pay particular attention that all label modifications are current with the changes.

2. Question: How do I find a distributor?

Answer: The USDA/FAS Office of Agricultural Affairs, U.S. Embassy and Toronto U.S. Consulate in Canada can provide marketing lists in helping U.S. companies identify a potential broker/distributor. Services available to help exporters locate appropriate brokers/distributors include USDA endorsed pavilions at various Canadian trade shows and referrals to the appropriate State Regional Trade Group (see "Entry Strategy" section).

3. Question: I know that Canada has a tariff rate quota for certain dairy and poultry products. How do I know if my particular dairy or poultry product is going to be affected by Canadian tariff rate quotas?

Answer: For a determination as to whether or not the product you intend to export into Canada is within the scope of Canada’s tariff rate quota (TRQ), contact Canada Border Services Agency.

Contact information can be found at the following webpage: http://cbsa-asfc.gc.ca/publications/dm-md/d10/d10-18-1-eng.html

4. Question: How do I identify the major Canadian importers of my product(s)?

Answer: Industry Canada (IC) maintains a database of major Canadian importers by product type. To access the database, go to IC’s web page at http://www.ic.gc.ca/eic/site/cid-dic.nsf/eng/home . The page will prompt the user to identify the product.

5. Question: Will there be import duties on my food products entering Canada?

Answer: Under provisions of the U.S./Canada Free Trade Agreement and the North American Free Trade Agreement (NAFTA), the majority of Canadian import duties on all U.S. food and commercial products have been phased out with a few exceptions like over-quota tariffs on dairy and poultry products. There are federal excise taxes and surcharges on alcoholic beverages. If using the services of a customs broker, there will be clearance and handling fees and these should not be confused for duty charges.

6. Question: I’ve heard that U.S. fruit and vegetable exporters can’t sell apples or potatoes to Canada. Is this true?

Answer: There are package-size regulations restricting bulk imports if Canadian supplies are available, but imports in consumer and wholesale sized packages are permitted. In fact, US apple exports to Canada averaged $150 million per year between 2008 and 2013. Commonly referred to as Canada’s “bulk waiver” requirement (or ministerial exemption), processors or packers must apply to the Canadian Food Inspection Agency (CFIA) for a special exemption to import bulk products. In late 2007, the United States and Canada established an arrangement to facilitate bilateral potato trade. The arrangement will provide U.S. potato producers with predictable access to Canadian Ministerial exemptions.

13 | P a g e

7. Question: My company is new to exporting. Can I test market my product(s) in Canada with my U.S. label? I don’t want to produce a label for the Canadian market until I know it will be successful.

Answer: Canada offers a test marketing provision; however, this provision has certain limitations and is specifically designed to facilitate those products that are highly unique and not currently found in Canada. This provision does not apply to U.S. brand introductions into Canada for processed foods commonly found on retail shelves. We highly encourage U.S. exporters to work with their respective State Regional Trade Group to see if they qualify for export assistance programs as some of the costs on packaging and labeling modifications may be covered.

Canadian Government Standards and Regulations

The Canadian Government has multiple acts that govern the importation and sales of foods. As previously noted, the Canadian government is overhauling its food and beverage regulations and will eventually combine them all into one larger price of legislation. For now, some of the most important laws in place are:

 Canada Agricultural Product Act and Associated Regulations  Consumer Packaging and Labelling Act  Fish Inspection Act  Food and Drug Act  Food and Drug Regulations  Importation of Intoxicating Liquors Act  Meat Inspection Act  Weight and Measures Act  U.S. exporters are urged to review the GAIN Export Guide (CA 15113) that helps to further breakdown regulations and steps to doing business in Canada.

Import documentation or an official inspection certificate is required for meat, poultry, dairy, egg, fresh fruit and vegetable. Information on these certificates may be obtained through the 2015 GAIN FAIRS Export Certification Requirements for Canada. All temporary and commercial import requirements may be reviewed through the Automated Import Reference Systems (AIRS) of the Canadian Food Inspection Agency (CRFA) at:

CRFA - Automated Import Reference System http://inspection.gc.ca/english/imp/airse.shtml

Selected Labelling Exemptions for Foodservice products

Products destined for the HRI segment are exempt from bilingual labeling companies and nutritional facts table. This is noted here:

14 | P a g e

Foods for Commercial or Industrial Enterprise or Institution Exemption of Nutrition Fact Table (NFT) labelling http://www.inspection.gc.ca/food/labelling/food-labelling-for-industry/nutrition- labelling/additional-information/restaurants-and-food-service- establishments/eng/1409850385603/1409850437890

Exemption of bilingual labelling on shipping containers destined to the HRI Sector http://www.inspection.gc.ca/food/labelling/food-labelling-for- industry/label/eng/1388160267737/1388160350769?chap=1#s2c1

Although, foodservice products are exempted from the submitting nutrition information in a NFT (format), food manufacturers are expected to provide nutrition information. This nutrition information may be adhered to the outside of the container or inserted in the container. Also, if the mandatory information is not displayed on the outside of containers then the information will need to be displayed on the respective foodservice packages inside the container.

The required mandatory information is:

1. Information in one official Language 2. Common Name 3. Country of Origin or 4. Identity and Principal Place of Business (manufacturer/Canadian dealer, noted “imported for/importé pour”). 5. Date Markings and Storage Instructions (includes durable life date) 6. Irradiated Foods 7. Net Quantities expressed in Metric Units 8. Legibility and Location 9. List of Ingredients and Allergens 10. Nutrition Information 11. Sweeteners

These requirements can be further reviewed at:

Industry Labelling Tool http://www.inspection.gc.ca/food/labelling/food-labelling-for- industry/eng/1383607266489/1383607344939

15 | P a g e

Key Contacts

Office of Agricultural Affairs U.S. Embassy, Canada P.O. Box 5000, MS-30 Ogdensburg, NY 13669-0430 Telephone: (613) 688-5267 Fax: (613) 688-3124 Email: [email protected]

Holly Higgins, Agricultural Minister-Counselor Jeff Zimmerman, Agricultural Attaché & Director of Marketing Darlene Dessureault, Senior Agricultural Specialist Mihai Lupescu, Agricultural Specialist Sonya Jenkins, Marketing Specialist Joyce Gagnon, Administrative Assistant

Foreign Agricultural Service U.S. Consulate General Toronto P.O. Box 135 Lewiston, NY 14092-0135 Telephone: (416) 646-1656 Fax: (416) 646-1389 Email: [email protected]

Maria Arbulu, Senior Agricultural Marketing Specialist

Summary of Useful Websites The following is a listing of the major Canadian websites mentioned in the body of this report:

http://www.cbsa-asfc.gc.ca/menu-eng.html Canada Border Services Agency

Canadian Food Inspection Agency

Home Page http://www.inspection.gc.ca

Acts and http://www.cfia-acia.agr.ca/english/reg/rege.shtml Regulations

Food Labelling http://www.inspection.gc.ca/english/fssa/labeti/guide/toce.shtml and Advertising Industry Labelling

16 | P a g e

Tool

Meat & Poultry http://www.inspection.gc.ca/english/fssa/meavia/meaviae.shtml Inspection Regulations

Fish Import http://www.inspection.gc.ca/food/fish-and-seafood/imports/documents/fish- Program Policy import-program-policy/eng/1360859473208/1360859694298

New Regulatory http://www.inspection.gc.ca/about-the-cfia/accountability/consultations/federal- Framework for food-inspection/overview-of-proposed- Federal Food regulations/eng/1400451508255/1400451811916 Inspection

Department of Foreign Affairs and http://www.international.gc.ca/international/index.aspx International Trade

Bank of Canada http://www.bankofcanada.ca/rates/exchange/daily-converter/ Daily Currency Convertor

Industry Canada Home Page http://www.ic.gc.ca/eic/site/ic1.nsf/eng/home Canadian Importers Database http://www.ic.gc.ca/eic/site/cid-dic.nsf/eng/home Trade Data Online http://www.ic.gc.ca/eic/site/tdo-dcd.nsf/eng/Home

Health Canada

Home Page http://www.hc-sc.gc.ca/index-eng.php

Food and Drugs Act http://laws.justice.gc.ca/en/F-27/

Nutrition Labeling http://www.hc-sc.gc.ca/fn-an/label-etiquet/nutrition/index_e.html

17 | P a g e

Natural Health Products http://www.hc-sc.gc.ca/dhp-mps/pubs/natur/index-eng.php

Food Allergen Labeling http://www.hc-sc.gc.ca/fn-an/label-etiquet/allergen/index- eng.php

http://www.hc-sc.gc.ca/fn-an/consult/2014-format-requirements- Proposed Changes to Format exigences-presentation/index-eng.php Requirement on Nutrition

Novel Foods http://www.hc-sc.gc.ca/fn-an/gmf-agm/index-eng.php

Justice Department

On-Line Access to Official Canadian Acts & Regulations http://www.justice.gc.ca

Pest Management Regulatory Agency

http://www.pmra-arla.gc.ca/english/aboutpmra/about-e.html Maximum Residue Levels

Key Trade Shows

Canadian Health Food Association and Show https://www.chfa.ca/en/index.html

Canadian Produce Marketing Association and http://convention.cpma.ca/ Convention Show

http://sialcanada.com/en/ SIAL Canada

https://www.restaurantscanada.org/en/Events Restaurants Canada

Media Publications and Associations

Canadian Restaurant & Foodservice News http://www.restaurantcentral.ca/ Restaurant Central

18 | P a g e

Canadian Hotel Association http://www.canadianlodgingnews.com/lodging

http://www.hoteliermagazine.com/ Canadian Lodging News

National Foodservice Distributors http://nfda.ca/our-members Association (Canada) https://restaurantscanada.org/ Restaurants Canada Association

Restaurants Canada Foodservice Buyers http://buyersguide.restaurantscanada.org/Categories.aspx Guide

Section III. Market Structure and Foodservice Distribution Channel U.S. Exporter

Canadian Food Customs Inspection Agency

Importer Distributor Wholesaler Broker Re-packer

Hotel Restaurant Institutional Foodservice Foodservice Foodservice

Foodservice Distributors

Domestic and imported food products in the Canadian market may be shipped directly to foodservice establishments but a most imports from the U.S. are filtered and managed through importers, brokers, food distributors, wholesalers and/or re-packers. These types of distributors are selling directly to the HRI accounts. The two largest and national foodservice distribution chains in Canada are Gordon Foodservice and Sysco. However, there are a number of regional foodservice distributors and some have specialized in niche products as natural food products. Large HRI chains may choose to purchase directly through customized growing agreements, contract purchasing, central procurement office or from a chain-wide designated distributor.

19 | P a g e

Canadian Partners - Broker/Food Distributor/Importer Arrangements

U.S. firms, particularly small to medium sized firms are recommended to partner with a Canadian food broker/food distributor/importer.3 Most food distributors and importers will import and take title of the shipment. In turn, the shipment is likely to be stored in their warehouse facility and then sold to various foodservice accounts. Brokers on the other hand, usually do not take title of the goods but act as a sales people to help develop awareness for the product to chain and individual accounts. There are some brokers that simply specialize in brokering foodservice products while others represent a combination of foodservice and retail products. Exporters are recommended to inquire a prospective’ s business split between foodservice and retail to help them assess if the Canadian firm has sufficient expertise in this segment of the market and resources to develop specific HRI accounts. In most cases, once a firm appoints a broker then they will build a distribution network for their food client. Usually brokers take a percentage of the product sales revenue, ranging from 3 percent to 10 percent. The percentage is influenced by several factors: the type of product line, expected sales volume, additional special services such as planning promotions or data collection. In the beginning, a broker may request a monthly retainer fee as they must ‘pioneer’ the product to prospective foodservice accounts and distributors. Once targeted sales volumes are reached then the broker will switch to a percentage of the established sales. All fees are negotiated between the principal and the broker prior to future transactions.

Sub-Sector Profiles

Hotels and Resorts

Company Name Head Office Number of Sales Location Outlets †($ Mil)/2014 Four Seasons Hotels and Resorts Toronto, ON 95 C$4,400.00

Fairmont Raffles Hotels International Toronto, ON 114 C$4,100.00

Starwood Hotels and Resorts Stamford, CT 68 C$ 912.20 Worldwide Inc.

Wyndham Hotel Group Parsippany, NJ 505 C$ 849.90

Marriott Hotels of Canada Mississauga, ON 85 C$ 784.70

3 There is a distinction between food distributors and foodservice distributors. The prior, does not solely specialize in selling foodservice products but may also carry retail lines and sell to foodservice accounts. Foodservice distributors sell strictly to HRI accounts.

20 | P a g e

Company Name Head Office Number of Sales Location Outlets †($ Mil)/2014 IHG (InterContinental Hotels Group) Atlanta, GA 173 C$ 776.00

Hilton Canada Co. Mississauga, ON 107 C$ 620.60

Best Western International Phoenix, AZ 197 C$ 574.00

InnVest REIT Mississauga, ON 110 C$ 534.80

Choice Hotels Canada Inc. Mississauga, ON 309 C$ 526.00

Delta Hotels & Resorts (Marriott) Mississauga, ON 37 C$ 476.20

Atlific Hotels Montreal, ON 59 C$ 461.00 Oxford Properties Group Toronto, ON 7 C$ 427.30

Superior Lodging/Master Built Hotels Calgary, AB 162 C$ 260.00

Sandman Hotel Group(Northland Vancouver, BC 46 C$ 207.60 Properties) O’Neil Hotels & Resorts Ltd., Vancouver, BC 67 C$ 206.90

Coast Hotels &Resorts Vancouver, BC 29 C$ 201.50

Source: Hotel Association of Canada Hotel Industry Fact Sheet (2015) †2014 Exchange Rate US$1.00 = C$1.10 (CAD)

In 2014, the accommodation sector in Canada generated C$17.5 (US$16) billion in revenue. The the occupancy rate for 2015 is projected to reach 64 percent while the average daily rate of expenditure is estimated at C$141(US$129)

21 | P a g e

Restaurants

Company Name Head Office Number of Sales Location Outlets †($ Mil)/2014 Tim Horton's Inc.* Oakville, ON 4,671 C$6,152.09 McDonald's Restaurants of Canada Ltd. Toronto, ON 1,440 C$3,744.00

Subway (Doctor’s Associates Inc.) Milford, CT 3,154 C$1,600.00 Boston Pizza International Inc. Mississauga, ON 366 C$ 975.00

Starbucks Coffee Canada Inc. Toronto, ON 950 C$ 940.00

A&W Foodservices of Canada Inc. Vancouver, BC 831 C$ 975.00

Coldstone Creamery Scottsdale, AZ 1,600 C$ 638.00 (Kahala Corporation) Wendy’s Restaurants of Canada** Oakville, ON 231 C$ 601.00

KFC (Yum Restaurants International Vaughan, ON 646 C$ 625.40 Canada company)2 International Dairy Queen Minneapolis, MN 617 C$ 558.00

Swiss Chalet ( Cara Operations)* Vaughan, ON 215 C$ 546.00

Keg Restaurants Ltd.* Richmond, BC 90 C$ 429.00

Pizza Pizza* Toronto, ON 629 C$ 408.40

Burger King Restaurants of Canada, Inc. Mississauga, ON 278 C$ 278.00

St. Hubert BBQ* Laval, QC 115 C$ 345.00

Yogen Frůz* Markham, ON 1005 C$ 326.60

Pizza Hut ( PH Company) Vaughan, ON 345 C$ 307.45

Harvey’s (Cara Operations) Vaughan, ON 261 C$ 220.00

Montana’s (Cara Operations) Vaughan, ON 91 C$ 234.00

22 | P a g e

Company Name Head Office Number of Sales Location Outlets †($ Mil)/2014 Moxie’s Grill & Bar* Vancouver, BC 66 C$ 192.00

Domino’s Pizza of Canada Windsor, ON 310 C$ 158.00

Source: Canadian Chains Directory 2014/2015, Foodservice and Hospitality, June 2015 /Top 100 * Canadian owned company ** Sales estimated †222014 Exchange Rate used US$1.00 = C$1.10

Top Five Fast-casual Restaurants

Company Name Head Office Location Number of Outlets Sales †($ Mil)/2014 Thai Express* St. Laurent, QC 254 C$ 89.30 (MTY Food Group, Inc.) Pita Pit* Kingston, ON 182 C$ 71.85 Five Guys Burgers and Fries* Lorton, VA 62 C$ 63.00 Mucho Burrito* St. Laurent, QC 86 C$ 56.20 (MTY Food Group Inc.) Hero Certified Burgers* Toronto, Ontario 57 C$ 39.00

Source: Euromonitor International, Canadian Chains Directory, and Ontario Top 50 Chains * Canadian owned company whose operations outside Canada are reflected in revenues and units ** Sales estimated †22014 Exchange Rate used US$1.00 = C$1.10

23 | P a g e

Top Five Sub/Sandwich Chains

Company Name Head Office Number of Sales Location Outlets †($ Mil)/2014 Subway (Doctor’s Associates Milford, CT 3,162 C$1,600.00 Inc.) Country Style Food Services, Inc. Richmond Hill, ON 442 C$ 220.10 * Quiznos Canada Restaurant Corp. Oakville, ON 332 C$ 166.00

Mr. Sub (MTY Group) Windsor, ON 311 C$ 88.80

Coffee Time Donuts Inc.* Toronto, ON 137 C$ 61.60

Source: Euromonitor International, Canadian Chains Directory, and Ontario Top 50 Chains * Canadian owned company ** Sales estimated †22014 Exchange Rate used US$1.00 = C$1.10

Top Five International/Ethnic Chains

Company Name Head Office Number of Sales Location Outlets †($ Mil)/2014 Pita Pit* Kingston, ON 532 C$ 226.00 Mandarin Restaurant Franchise , ON 23 C$ 125.00 Corporation* Thai Express (MTY Group)* St-Laurent, QC 254 C$ 89.30

Lone Star Texas Grill Restaurants Oakville, ON 23 C$ 54.00

Teriyaki Experience* Oakville, ON 131 C$ 42.20

Source: Foodservice and Hospitality, June 2015/Top 100, , Canadian Chains Directory, and Ontario Top 50 Chains * Canadian owned company ** Sales estimated 22014 Exchange Rate used US$1.00 = C$1.10

24 | P a g e

Top Five Coffee/Pastry Chains

Company Name Head Office Number of Sales Location Outlets †($ Mil)/2014 Tim Horton's Inc.* Oakville, ON 4,671 C$6,152.09 McDonald's Restaurants of Canada Toronto, ON 1,440 C$3,744.00 Ltd.** Starbucks Coffee Canada Inc. Toronto, ON 950 C$ 940.00

Second Cup Ltd.* Mississauga, ON 382 C$ 182.80

Country Style Food Services, Inc. * Richmond Hill, ON 442 C$ 143.10

Source: Foodservice and Hospitality, June 2015 /Top 100, Canadian Chains Directory, and Ontario Top 50 Chains * Canadian owned company ** Sales estimated †2Exchange Rate used US$1.00 = C$1.10

Institutional

Company Name Head Office Number of Outlets Sales Location †($ Mil)/2014 Compass Group Mississauga, ON 2,220 C$1,450.00 Canada (focus on educational institutions, hospitals, airports, businesses)

Aramark Canada Toronto, ON 1,500 C$ 959.00 Ltd. (focus on health-care, educational, public and remote-market businesses)

Sodexo Canada Burlington, ON 750 C$ 530.10 Ltd.** (focus on educational institutions, hospitals and corporate businesses)

Dana Hospitality Oakville, ON 80 C$ 48.54 Inc. (residential and educational foodservice, resource industries, seniors' market)

25 | P a g e

Company Name Head Office Number of Outlets Sales Location †($ Mil)/2014 ClubLink King City, ON 34 C$ 35.63 Corporation (Golf Courses)

Source: Foodservice and Hospitality Magazine Top 100 Report * Canadian owned company whose operations outside Canada are reflected in revenues and units ** Sales estimated 2014 Exchange Rate used US$1.00 = C$1.10

Partial Listing of Foodservice Distributors

Company Head Office Geographical Website Name Coverage

Associated Food Newmarket, National www.newmarketgroup.com/ Distributors ON

Sysco Foodservices of Toronto, ON National www.sysco.ca Canada, Inc. Gordon F. Service Milton, ON National www.gfscanada.com

Colabor (Summit Foods) Boucherville, Quebec, Ontario & www.colabor.com QC Atlantic Canada

Food Supplies Co., Inc. Concord, ON Ontario www.foodsupplies.ca

Flanagan Foodservice Kitchener, ON Ontario www.flanagan.ca

Freshpoint (Division of Vancouver, BC Western Canada www.freshpoint.com Sysco/Produce) Ideal Foodservice Sydney, NS Nova Scotia www.idealfoods.ca

Reliable Food Supplies Mississauga, www.reliablefoods.com ON

26 | P a g e

Company Head Office Geographical Website Name Coverage

I-D Foods Corp. Laval, QC Ontario & Quebec www.idfoods.com

Stewart Foodservice Inc. Barrie, ON Ontario www.stewartfoodservice.com

Pratts Foodservice Winnepeg, MB Alberta & www.pratts.ca Manitoba

Belmont Meats Toronto, ON Greater Toronto Area www.belmontmeats.com

Beverage World Stoney Creek, Ontario www.beverageworld.ca ON Classic Gourmet Coffee Concord, ON Ontario www.classiccoffee.ca

Willoughby Distribution Don Mills, ON Ontario www.willoughbydistribution.ca Inc. PepsiCo Canada Mississauga, National www.pepisico.ca ON UNFI Canada Concord, ON National www.unfi.com (Foodservice Division)

Qualifirst Foods Ltd. Rexdale, ON Ontario and Quebec www.qualifirst.com

J & D Foodservices Edmonton, ON Alberta www.jdfoodservices.ca

Source: Canadian Scotts Directories and Canadian Chains Directory 2014 – 2015

27 | P a g e

Section IV. The GRID on Leading U.S. Products and the Competition

Product Major Strengths of Key Supply Countries Advantages and Category Supply Disadvantages of Sources Local Suppliers FRESH FRUITS . Canada is the largest foreign buyer of U.S. fruits . Lettuce, onions, carrots, & and vegetables. The U.S. benefits from relatively tomatoes, potatoes, VEGETABLES unimpeded export access into Canada during cauliflower, and spinach Canada’s winter or non-growing months. are the leading vegetables VEGETABLES: . Among imports, U.S. fruits and vegetables are sold in the fresh market. VEGETABLES: viewed by most Canadians as their number one . Apples are the largest CANADIAN 1. U.S.: 66% choice to other imports. production item, followed GLOBAL 2. Mexico: . Mexico maintained the same level of market share by blueberries, IMPORTS (2014): 26% in Canada for the last three years. They remain a cranberries, grapes and 3. Peru: 2% major competitor due to lower prices, along with peaches. U.S. $2.4. some Canadian produce companies with winter . Seasonality poses a BILLION operations in Mexico. Their leading products are constraint to growers; tomatoes, cucumbers, asparagus, Canada imports 80% of its raspberries/blackberries/strawberries, peppers, fresh vegetables between avocados, watermelons, papayas, lemons/ limes. November and June. FRUIT: FRUIT: . Peru is competitive with their asparagus, avocados, . The ‘Buy Local’ artichokes and some citrus products. campaigns are well CANADIAN 1. U.S.: 47% supported by grocery GLOBAL 2. Mexico: retailers starting in June IMPORTS (2014): 14% through October. 3. Chile: 9% U.S. $3.6 BILLION

PROCESSED 1. U.S.: 62% . There is a full range of prepared and frozen . Canadian companies FRUITS AND 2. China: 7% products. Major products are prepared potatoes, process a wide range of VEGETABLES 3. Mexico: 4% tomato paste, mixes fruits, and variety of processed canned, chilled, and vegetables. frozen products. CANADIAN . U.S. is a major player in the market with . Adoption of advanced GLOBAL established process brands in the market. technologies in food IMPORTS (2014): . China’s products are dried and prepared vegetables processing has been fairly and fruits. extensive among U.S. $2.3 . Mexico supplies prepared and frozen strawberries Canadian processors. BILLION and other prepared fruits and vegetables. Statistics Canada reported almost 50% companies adopted more than 5 new technologies in their operations. . Higher manufacturing and operation costs than in the U.S.

28 | P a g e

Product Major Strengths of Key Supply Advantages and Category Supply Countries Disadvantages of Local (continued) Sources Suppliers

SNACK FOODS 1. U.S.: 59% . The U.S. dominates this category . Canada’s snack food imports have 2. Mexico: 6% with snack breads, pastry cakes, grown by U.S. $95 million since 2012. CANADIAN GLOBAL 3. Belgium: pretzels, chips, cookies, and dried The category includes chocolate and IMPORTS (2014): 5% fruits, non-chocolate confectionary, cookies, . Competitors vary by sub category crackers, potato chips, corn chips, U.S. $1.7 BILLION with the main competitor and sub popped popcorn, pretzels, and (excluding peanuts) category as follows: Mexico: extruded cheese snacks, seed snacks, cookies and biscuits; Belgium: mixed nuts, peanuts and peanut butter, chocolate and confections. U.K. as well as pork rinds. Germany and Switzerland; . The snack food industry is served chocolate, along with confection primarily by domestic manufacturers and non-confection items. however domestic market share is being lost to imports. The rapid increase in imports is due to the number of new products in the category, such as a variety of crackers and other products targeted at specific ethnic groups . Canada does have domestic raw materials for the grain based products but has to import sugar, chocolate, cacao, and nuts for manufacturing and is not competitive on dairy and egg ingredients used in some of the processing.

RED MEATS 1. U.S.: 71% . Beef imports fall into two distinct . Canada maintains a narrow acquired (Fresh/Chilled/Frozen) 2. Australia: categories. The largest portion of feed cost advantage. 13%: imports being chilled cuts . Canada continues to grow as a key CANADIAN GLOBAL 3. New traditionally from the U.S. U.S. pork export market. Canadian IMPORTS (2014): Zealand: Midwest heavily destined for the hog production numbers have been 8% Ontario region. The other part is declining across the country and U.S. U.S. $1.8 BILLION frozen manufacturing meat from pork imports are up 16% due to Australia (for grinding) and New market structures and the Canadian RED MEATS Zealand (largely for specific strong dollar. (Prepared/Preserved) manufacturing purposes). . The industry has worked its way out of 1. U.S.: 93% . Many parts of South America the inventory surge from the BSE CANADIAN GLOBAL 2. Thailand remain ineligible for entry to trade disruption. IMPORTS (2014): 3% Canada (except as a supplier of . Canadian per capita basis consumption 3. Brazil 2% cooked and canned beef) due to has declined since 2009, falling by U.S. $1.BILLION sanitary reasons. .7% to 23.4 kg. . U.S. competitors are limited by a beef quota.

29 | P a g e

Product Category Major Strengths of Key Supply Advantages and Disadvantages (continued) Supply Countries of Local Suppliers Sources

FISH & SEAFOOD 1. U.S.: 34% . Leading U.S. exports to . Declining fish stocks have led to almost 2. China 15% Canada are live lobsters, zero growth in fish and seafood catch 3. Thailand: salmon and prepared and over the last decade. CANADIAN GLOBAL 11% preserved fish. . Lobster, crab and shrimp comprise 67% IMPORTS (2014): . Fish filleting is extremely labor of the landed value of all fish and intensive, which accounts for shellfish harvested in Canada. U.S. $2.7 BILLION the rapid penetration of China . At approximately 50 lbs. per person, and Thailand in this segment. Canadian consumption of fish is . With ocean catches having significantly higher than in the U.S. peaked, aqua culture is 16.5 lbs. per person, making Canada an becoming a more important excellent export market for U.S. source of product and China is exporters. the dominant producer of . Frozen processed seafood grew by 6% farmed fish and seafood in the in the past year with demand for world. premium products offering hormone- . A growing concern among free and free of antibiotic variants. consumers and retailers for sustainable production practices may help some U.S. fish processors. . More than two-thirds of seafood is sold by retailers. BREAKFAST 1. U.S.: 93% . Breakfast cereal imports have . Sales and manufacturing in Canada is CEREALS/PANCAKE 2. U.K.: 2% grown by over US$103 million largely controlled by U.S. based MIXES 3. Belgium: since 2010. The U.S. continues companies. 1% to dominate imports with ready . Domestic non-U.S. owned competitors CANADIAN GLOBAL to serve product that are tend to be in the specialty or organic IMPORTS (2014): popular. breakfast cereal business. . Although, the U.K.’s share of . Breakfast cereals are expected to shrink U.S. $522 MILLION the market is small they have a by 1% in volume in the coming years couple of well-established as consumers choose other breakfast brands in the market. options, as yoghurts and protein shakes and bars.

30 | P a g e

Product Major Strengths of Key Supply Advantages and Disadvantages of Local Category Supply Countries Suppliers (continued) Sources FRUIT & 1. U.S.: . Although Canada’s imports . Canada is a major per capita consumer of citrus VEGETABLE 62% from both the world and from juices but is unable to grow these products. It will JUICES 2. Brazil the U.S. decreased slightly, continue to be an exceptional value added market 17% fresh orange juice showed a for the U.S. CANADIAN 3. China small increase . Both Canada and the U.S. have experienced major GLOBAL 6% . Brazil is the leader in frozen penetration by Chinese apple juice due to the major IMPORTS (2014): orange juice concentrate shift of Chinese agriculture toward labor-intensive . China’s major juice export to crops and labor intensive processing. U.S. $698 Canada is fortified apple MILLION juice; China represents 88% of its imports for this category NUTS Tree Nuts . This category continues to . Canada has areas of Ontario, which can grow 1. U.S.: put in a strong showing in peanuts, but it has not done so in commercial CANADIAN 63% Canada. Tree nuts grew by quantities as the returns are not competitive with GLOBAL 2. Turkey: 17% from 2013 to 2014, other crop alternatives. Similarly British Columbia IMPORTS (2014): 11% probably helped the and other provinces produce small quantities of a 3. Vietnam: increased interest in healthy number of tree nuts including hazelnuts. However, Tree Nuts 8% snacking in general, Canada is not price competitive. U.S. $656 . US products lead with MILLION peanuts and almonds is preferred by Canadian Peanuts importers as it meets U.S. $117 Peanuts Canadian sanitary and MILLION 1. U.S. : phytosanitary standards 79% consistently. 2. China: . Turkey is a competitive 14% supplier of Hazelnuts, 3. Vietnam competes in cashew Nicaragua: nuts. 3% . Growing trend of nut allergies in Canadians caused the Canadian Food Inspection Agency and Health Canada to set specific allergen labeling regulations for all suppliers in 2012. PET FOOD 1. U.S.: . U.S. imports of dog and cat . Pet food sector is largely U.S. owned multinationals. ( Dog and Cat) 93% food registered at U.S. $614 . Canada has approximately 17 (non-raw) pet food 2. China: million in 2014, a 3% manufacturers. CANADIAN 3% increase from 2013 . New pet food importation requirements have been in GLOBAL 3. Thailand: . Canadians regard U.S. pet place as of June 2009. IMPORTS (2014): 2% foods as a trusted and quality . More than 322,000 tonnes of pet food is sold in product. Canada. . Demand for premium pet U.S. $659 foods is helping drive the MILLION growth in this category.

31 | P a g e

Products Imported in Canada Facing Significant Barriers Product Major Strengths of Key Supply Advantages and Disadvantages of Local Category Supply Countries Suppliers (continued) Sources POULTRY 1. U.S.: . The U.S. is the world’s largest . The Canadian poultry industry is a Tariff Regulated MEAT 90% producer of poultry meat. Industry with live bird and meat prices well above 2. Brazil: Brazil is the largest exporter of the world market. The Canadian strategy has been 7% poultry meat and can land to differentiate the product particularly at retail CANADIAN 3. Chile: 1 product in Canada at a lower through air chilling and such additional attributes as GLOBAL % cost compared to the U.S. ‘vegetable grain fed chicken” However the scale of IMPORTS . Brazil has rapidly expanded its plant operations in Canada remains relatively small (2014): share of the Canadian broiler due to the supply managed system. In an effort to market except with Canadian mitigate this and to offset difficulty obtaining labor, U.S. $437 further processing plants that Canadian processing plants are among the most MILLION do not want to take the risk of highly mechanized sectors in Canadian agriculture commingling U.S. and and employ the latest in robotics. Brazilian origin which would . The Canadian industry has significantly increased result in being unable to sell surveillance since the A.I. processed products to the outbreaks in B.C. in 2004 and has continuously U.S.A. improved bio-security measures. . Many imports of U.S. chicken are due in part to imports under the Canadian Import for Re- Export Program (IREP).

32 | P a g e

Products Imported in Canada Facing Significant Barriers Product Major Strengths of Key Supply Advantages and Disadvantages of Category Supply Countries Local Suppliers Sources

DAIRY 1. U.S.:  The U.S.’s close proximity to . The Canadian dairy market operates under a 67% market, speedy delivery, and supply management system, which attempts to CANADIAN 2. New significant freight advantage has match domestic supply with domestic demand GLOBAL Zealand: allowed it to be competitive in the while paying producers on a cost of production IMPORTS 14% Canadian Import for Re-export related formula. This system has tended to price (2014): 3. Program (IREP) which allows U.S. dairy products above prevailing world levels. Germany: dairy product to be imported into Imports are controlled under Tariff-rate-quota (excluding 8% Canada duty free, and used in (TRQ) and over quota imports are subject to cheese): further processing, provided the high tariffs. U.S. $384 product is subsequently exported. . American suppliers have taken advantage of the MILLION  The European Union has a distinct Import for Re-export Program (IREP), which advantage in the cheese trade since allows Canadian processors to import dairy it has been allocated 66% of products used in manufacturing provided the Canada’s cheese quota as a result of product is exported. The U.S. is the largest the 1994 Agreement on Agriculture user of this program due to the perishable (Cheese) : (AoA). Though details of the nature of the products. U.S. $271 CETA free trade agreement . Canadian tariff rate quotas stipulate a 50-per- MILLION between Canada and the EU have cent dairy content guideline for imported yet to be finalized, it is expected product, resulting in the creation of ingredients that this advantage will either and blend products that are designed to 1. U.S. increase or be maintained. circumvent this guideline. Butter-oil-sugar 26%  New Zealand has a cost leadership blends were the first major products to be 2. Italy advantage. Low costs of imported tariff-free, displacing Canadian milk 19% production due to the availability of for ice cream. More recently there has been an 3. France year-round pasturage have helped increase in flavored milks imported as 18% New Zealand achieve a 30% share “beverages” and a number of milk proteins of world dairy exports. New which are not captured by the dairy TRQ. Zealand has an additional advantage on butter imports into Canada and hold 61% of Canada’s import quota for butter.

33 | P a g e

Products Imported in Canada Facing Significant Barriers Product Major Strengths of Key Supply Advantages and Disadvantages of Local Category Supply Countries Suppliers Sources

EGGS & EGG 1. U.S.: The U.S. egg industry Canada’s egg industry operates under Supply PRODUCTS 96% traditionally fills Canada’s Management, which is designed to encourage 2. China: needs when supply is production of a sufficient volume of eggs to meet CANADIAN 2% seasonally low. There were market needs without creating surplus. The market GLOBAL 3. New significant increases in U.S. is protected by high tariffs. Today, about 75% of IMPORTS Zealand imports following the Avian Canada’s total egg production is sold for the table (2014): : 1% Flu outbreaks in B.C. to both market, while the remaining 25% is used in the avert shortages in the market manufacturing of value-added food and other and rebuild the hatching egg products (liquid, frozen or dried form). These U.S. $150 supply. supplies are supplemented by imports and a Tariff MILLION The U.S. has also become a Rate Quota system. supplier of organic eggs to The Canadian industry has made considerable Canada. inroads at retail with differentiated egg offerings such as “free range”, Omega 3, and Organic all of which are sold at a premium.. The Canadian Egg Marketing Agency has a sustained media campaign focused on the health benefits of eggs to support retail movement.

Section V. Growing Trends

Diet Friendly

34 | P a g e

Healthy eating continues to grow as Restaurants Canada recently reported 92% of Canadians feel it is important to know about the nutrition in the foods they eat. Canadians have become more selective in what they choice off the menu. As a result, more and more menus highlight offerings that are lite in calories and provide the maximum of nutrients. To meet this demand, a national program was launched a few years ago in British Columbia called Informed Dining whereby 10,000 restaurants are currently participating in the program.

As mentioned earlier in this report, consumers have shifted from traditional QSR to more fast-casual restaurants looking to find options of fresh, made-to-order salads, wraps, soups and rice bowls. Demand for foods that are free of gluten, trans-fats, sugar and/or lactose are slowing becoming a permanent item on menus. Functional foods and organics also continue to be popular. Voluntary sodium reductions are taking place in processed products of all kinds to take advantage of this trend. Also, as further note, some restaurants are now offering smaller portions.

Snacking Snacking continues to grow in importance in the Canadian market. In Technomic's 2014 "Canadian Snacking Consumer Trend Report," 56 percent of respondents revealed that they snack at least twice per day. Foodservice outlets are responding by altering their menus, McDonald's snack wraps are an example. Snacking also blurs the line between traditional dayparts, which has caused some outlets to extend their service to allow for late-night options, longer breakfast hours, etc. As an extension of this, small plates and sharing meals are also becoming more popular in foodservice outlets.

Fruits and Vegetables Fruits and vegetables are continues to be in demand. While vegetables are moving to the center of the plate in Canada and are no longer treated as solely side dishes; fruits are being highlighted in desserts options, such as fruit crepes and fruit tarts. This is a continuation of the trend toward healthy eating, which is now seeing more consumers embrace "flexitarian" choices that do not always include meat. Leafy greens, such as kale and mustard greens continue to grow with berries and pears in higher demand.

Ethnic Foods The interest in new flavors, spicy food and exotic sauces continue to rise among Canadians. However, some flavors are too strong and some processors have modified their flavors while keeping the integrity of original taste in an effort to appeal to the Canadian palate. Asian food is projected to continue to grow in popularity in the coming year both foods originally from China, Japan, and Korea, as well as South Asian foods. In many cities in Canada, izakayas (casual, Japanese drinking establishments) as well as noodle and ramen bars are prevalent. Fusion style cooking continues to be ever so popular, a reflection of the country where there are high concentrations of new Canadians, particularly in urban areas. This style of cooking permits chefs to explore other styles of cooking.

Section VI. Top Ten Hot Trends on Canadian Menus

Product 1 Ethnic/Street Food inspired appetizers 2 Ancient Grains 3 Unusual / uncommon herbs 35 | P a g e

4 Non-wheat noodles 5 Fewer Choices on the menu but healthier 6 Natural ingredients/minimally processed foods 7 Fermenting 8 Natural sweeteners 9 Family-style dining (e.g. shared plates) 10 Vinegar/flavored vinegar/house-made vinegar Source: CRFA’s Foodservice Facts 2015

Market Sector Reports

Listed below are the food sector and marketing reports published by the Office of Agricultural Affairs in Ottawa and Toronto, Canada. For a complete listing of other Post reports and of FAS’ worldwide agricultural reporting, visit the FAS GAIN web page and be sure to insert the report number at: http://gain.fas.usda.gov/Lists/Advanced percent20Search/AllItems.aspx

AGR Title of Report Date REPORT# CA 15113 Exporter Guide: A Practical Guide 12/16/2015 CA 15109 An Updated Overview of the Retail Sector in Canada 12/9/2015 CA 15100 Fresh Deciduous Fruit Annual 10/27/15 CA 15084 Canadian Labelling Requirements for Fresh Fruits and Vegetables 09/23/15 CA 15074 Pesticides and MRLs in Canada 08/07/15 CA 15058 Proposed Changes to Nutrition Labelling Regulations Published 06/23/15 CA 15040 Container Size Regulations 04/24/15 CA 15026 Canada Top Market for U.S. High Value Agricultural Exports 03/19/15 CA 15012 Outlook of 2015 Canadian Food and Beverage Trends 01/30/15 CA 14117 An Overview of the Food Processing Sector in Canada 12/17/14 CA 14103 Entering Canada with Products for a Show or Trade Fair 11/07/14 CA 14054 Turkey Meat in Canada 05/28/14 CA 14044 Impact of Canadian Trade Action Taken Against US-Origin Pizza 05/07/14 Toppings Kits CA 14024 Canadians to Consume More Poultry Meat in 2014 02/27/14 CA 13008 Survey Voluntary – Canadian Consumer Insights 02/08/13

Appendix A. Trade and Demographic Information

Agricultural Imports/from All Countries/2014/U.S. Market Share 1 $37.8 billion/ 61 percent

36 | P a g e

Consumer Food Imports/from All Countries/2014/U.S. Market Share 1 $26.3 billion/ 64 percent

Total Population, July 2014 1 35.8 million Canada’s three major urban centers 1  Toronto 6.0 million 4.0 million  Montreal 2.4 million

 Vancouver

Urban Population / Rural Population / Percent Urban/2011 2 27.1 mil./6.3mil/ 81 percent urban/ 19 percent rural

Number of Metropolitan Areas Over 100,0001/ 33

Per Capita Gross Domestic Product (U.S. dollars), per capita; 2014 $45,000 3/estimate

Unemployment Rate (October 2015)1 7 percent

Average Household Spending on food and , retail/foodservice, $610 monthly/ 2013; (U.S. dollars) 4/ $7,318 annually  $5,276/Retail

 $2,041/Foodservice

Total Employment / Full & Part Time; November 2014 5/ 17.8 million

Exchange Rate, average annual 2014 6 $1USD = $1.10 CAD

Exchange Rate, average rate between January to June of 2015 6/estimate $1USD = $1.24 CAD

Footnotes: 1/Global Trade Atlas 2/Statistics Canada 3/ CIA World Factbook 4/ 2011 Survey of Household Spending Statistics Canada/based on 19.5 million households 5/ Canada: Economic and Financial Data, Statistics Canada 6/ Bank of Canada

37 | P a g e

Appendix B. Summary of Key Resources

Agricultural and Agri-Canada. (2015). Canadian Consumers. Bank of Canada BICO Reports/USDA (2015) Canadian Chains Directory (2014 – 2015) Canadian Research Data Centre Network Canadian Food Inspection Agency Canadian Institutional Foodservice Market Report by fsStrategy. (2014) Canadian Institutional Foodservice Market Report by fsStrategy. (2015) Centre for Science in the Public Interest (CSPI) CIA World Fact Book (2014) GE Canadian Chain Restaurant Industry Review Department of Justice (Canada) (2015) Euromonitor International. Consumer Foodservice in Canada FoodService and Hospitality. The 2015 Top 100 (June 2015) FoodService and Hospitality. The Big Black Book (2014) Global Trade Atlas (2015) Health Canada Hotel Association of Canada. Fact Sheet (2014/2015) Restaurants Canada. Foodservice Facts (2015) Statistics Canada (2015)

38 | P a g e